Inside Spain Nr 139 18 April - 16 May 2017
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Inside Spain Nr 139 18 April - 16 May 2017 William Chislett Summary Spain aims to use Brexit to change Gibraltar’s ‘unfair’ economic model. Popular Party rocked by yet more corruption scandals. Government finally close to gaining support for 2017 budget. Population slips for fifth consecutive year. US Cordish resubmits mega casino and hotel project for Madrid. Foreign Policy Spain aims to use Brexit to change Gibraltar’s ‘unfair’ economic model… The government sees a chance in the Brexit negotiations to exert pressure on the UK overseas territory of Gibraltar, which voted 96% in favour of remaining in the EU, to change its low-tax model which it regards as a ‘tax haven’ that engages in ‘unfair competition’. Following the European Council’s approval of the Brexit negotiation guidelines, which among other things condition any future relationship between Gibraltar and the EU to prior agreement between the UK and Spain, Spain’s Foreign Ministry set out its position in a document sent to parliament. Spain entered the EU in 1986, 13 years after the UK and along with it Gibraltar, and had to accept the Rock’s special regime. But since then Gibraltar’s position has allegedly ‘led to a situation of unjust privilege’. Madrid points out that Gibraltar enjoys the four EU freedoms (free movement of people, goods, services and capital), yet is not part of the customs union or subject to British law. As a result, ‘it has developed its own regime that is extremely permissive on issues such as tax, customs and business creation, which, in practice, has turned it into a tax haven’. The maximum rate on personal income is 25% and corporate tax is 10%, both much lower than in Spain but comparable to some other EU jurisdictions such as Luxembourg and Dublin. Gibraltar does not have to apply VAT, and there is no tax on capital gains, wealth and inheritance and no withholding tax. There are more companies registered in Gibraltar than the 11,400 households. Gibraltar received a glowing review from the OECD of its record on exchange of tax information and transparency. Its overall rating was largely compliant, the same as the UK, Germany and the US. 1 Inside Spain Nr 139 18 April - 16 May 2017 Madrid refuses to sign bilateral tax information and double taxation agreements with Gibraltar as it views this as tantamount to recognising the Rock. The Popular Party government says it will not use Brexit to resolve the age-old sovereignty dispute (Gibraltar was ceded to Great Britain under the 1713 Treaty of Utrecht), but it will push for a post-Brexit situation that ‘prevents an economic situation of unfair competition’. Gibraltar has rejected Madrid’s offer of shared sovereignty as a way to remain part of the EU. While the Spanish government is adopting a predictably hard stance towards Gibraltar, as it sees an opportunity to press its case, it would like a ‘soft’ Brexit because of the magnitude of the trade and investment relation with the UK and the large number of Britons living in Spain and Spaniards in the UK. Madrid would like little change in the current legislation on the rights of European citizens already resident in the UK and British nationals in the EU. One proposal is for the rights of these nationals to be respected if they have lived in these countries for more than five years. Government grants citizenship to Venezuelan critic The government granted Spanish citizenship to Miguel Henrique Otero, the editor of El Nacional, the only remaining national newspaper in Venezuela still openly critical of President Nicolas Maduro’s increasingly authoritarian government. Otero fled Venezuela ‘for fear of reprisals’ after having received ‘threats from the Venezuelan regime’. He runs the newspaper from Spain. Relations between Madrid and Caracas have been tense for a decade. In the most publicised spat, King Juan Carlos told Maduro’s predecessor, Hugo Chávez, to ‘shut up’ at the 2007 Ibero-American summit in Chile after he called José María Aznar, a former conservative Prime Minister, a ‘fascist’. In 2014, the Venezuelan government recalled its Ambassador after Aznar’s successor, Prime Minister Mariano Rajoy voiced support for Leopoldo López, a jailed opposition leader. López was imprisoned in 2015 for 14 years for inciting violence during protests (a sentence upheld by the Supreme Court in February 2017). José Luis Rodríguez Zapatero, a former Socialist Prime Minister, is attempting to mediate between the Venezuelan government and the opposition, but with no results so far. Earlier this month Maduro accused Movistar, a subsidiary of Spain’s Telefónica, which has been operating in Venezuela since 2005, of helping to orchestrate protests against 2 Inside Spain Nr 139 18 April - 16 May 2017 his government. Movistar clients used their mobiles to send messages in support of protests. Hyperinflation and an economy that contracted 10% last year and continues to shrink, coupled with a regime that has become a dictatorship, are driving Venezuelans to emigrate to Spain. Domestic Scene Popular Party rocked by yet more corruption scandals The corruption scandals that have engulfed the ruling Popular Party (PP) seem to be never ending. In the latest one, Ignacio Gonzalez, a former regional Prime Minister of Madrid (2012-15), was arrested and imprisoned as part of a probe into the alleged misuse of public funds at a water company, while his predecessor, Esperanza Aguirre (2003-12) and then leader of the PP group in the city’s parliament, resigned after admitting she had failed to properly oversee the actions of her protégé. Dubbed Operation Lezo, the investigation has produced some high-profile arrests, including Javier López Madrid, the CEO of the big construction company OHL. His father- in-law, Juan Miguel Villar Mir, the controlling shareholder in OHL, and Eduardo Zaplana, a former Mayor of Benidorm and Spain’s Labour Minister from 2002 to 2004 were named in a court list of 60 individuals targeted in the probe. The publicly-owned water company, Canal de Isabel II, controlled at the time by the then PP-led Madrid government, is believed to have been involved in suspicious transactions, including the purchase of a company in Latin America at a price way above its market value. The Civil Guard searched OHL’s headquarters in Madrid and took away documents regarding the 2007 contract for building and operating a commuter train service and the alleged payment of a commission to González in his Swiss bank account. In other ongoing cases of corruption, embezzlement and misappropriation of public funds, Francisco Granados, a former Madrid PP Secretary General, has been in prison since October 2014 awaiting trial. Last February judges handed down 11 convictions in the Gürtel bribes-for-contracts case (between 1999 and 2005) that is still in the courts. Rajoy has been summoned to testify in the Gürtel case. He is not accused of any wrongdoing himself. Rajoy has always denied any knowledge of what went on. Fourteen people who held senior political posts when Aguirre was Prime Minister of the Madrid regional government, including four mayors and five members of her cabinet, are under investigation. 3 Inside Spain Nr 139 18 April - 16 May 2017 The far-left party Podemos seized on the latest scandals and vowed to table a no- confidence vote in parliament against Prime Minister Mariano Rajoy, although it has no chance of succeeding as it does not have the support of the Socialists or the centrist Ciudadanos. The deeply divided Socialists are embroiled in a bruising process for choosing a new leader in a primary election to be held later this month with three candidates. Ninety-six per cent of those surveyed by Metroscopia last month said they believed more corruption scandals would be unearthed. In a separate development regarding the long-running investigation into the unexplained wealth of Jordi Pujol, a former regional Prime Minister of Catalonia (1980-2003), his wife and their seven children, police said the family had hidden more than €70 million in Andorra. An unearthed document, dated 1995, showed Pujol’s wife Marta giving coded instructions to her bank to move money (she addressed herself to ‘Reverend Mosén’ and called herself ‘mother superior’ of a Congregation). The Pujol family said the document was false. Her eldest son, Jordi, was jailed without bail last month after a judge decided he was obstructing an investigation into alleged money laundering and tax fraud carried out by his family. Population slips for fifth consecutive year… Spain’s registered population continued to fall in 2016, albeit by a marginal amount of 17,982 to 46.5 million (-726,295 since 2012), according to provisional figures by the National Statistics Institute (INE). The fall, for the fifth straight year, was due to foreigners leaving the country (see Figure 1). The number of Spaniards rose by 50,741 to 41.98 million while foreigners dropped by 68,723 to 4.54 million (9.8% of the total population). The number of foreigners at 1 January 2017 was 1.3 million below the peak of 5.8 million in 2011. The largest fall was in the number of Rumanians (-32,930 to 684,532), followed by Britons (-19,832 to 236,669), and the biggest rise in the Chinese (+7,446 to 207,593). 4 Inside Spain Nr 139 18 April - 16 May 2017 Figure 1. Registered foreign population by the top-10 countries of origin, 1/I/2017 and 1/I/2016 2017 (1) 2016 Change Morocco 747,872 755,459 -7,587 Rumania 684,532 717,462 -32,930 UK 236,669 256,501 -19,832 China 207,593 200,147 +7,446 Italy 189,005 182,269 +6,736 Colombia 145,055 140,527 +4,528 Ecuador 141,582 158,285 -16,703 Bulgaria 126,997 133,951 -6,954 Germany 110,378 119,820 -9,442 Ukraine 102,786 99,060 +3,726 Other 1,857,389 1,855,100 +2,289 Total 4,549,858 4,618,581 -68,723 (1) Provisional figures.